After the discovery of Swiss-made hand grenades in an Islamic State cache in Syria, parliament last month voted to block the government from setting by decree new criteria for weapons exports.

“There is no longer sufficient political support for the reform...,” the government said after a cabinet meeting.

“Furthermore, to insist on the amendment might be counterproductive with regard to existing authorisation practices.”

Opponents of looser rules, who were also running a referendum campaign under the Swiss system of direct democracy, said the proposed changes opened the door to weapons landing in the wrong hands and posed a reputational risk.

Under the government’s original proposal in May, countries fighting civil wars would have been able to buy Swiss arms provided there was no reason to believe they would be used in the conflict.

The Swiss weapons industry - including state-owned RUAG Holding and subsidiaries of General Dynamics and Germany’s Rheinmetall - pushed for the concession, saying existing restrictions put their foreign competitors at an advantage.

RUAG acknowledged the grenades taken from Islamic State may have been among 250,000 delivered to the United Arab Emirates in 2003/2004.

Supporters of looser export rules also say Switzerland needs robust domestic weapons makers for security but cannot buy arms in numbers sufficient to prop up the industry by itself.

In 2017, companies exported weaponry worth 446.8 million Swiss francs ($443.6 million) to 64 countries, up 8 percent from 2016. Nearly half went to Europe, with sales to the Americas and Asia on the rise.

($1 = 1.0072 Swiss francs)

Reporting by Michael Shields and John Miller; editing by John
Stonestreet